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Bitcoin futures (BTC)

CME contracts on 5 bitcoin, cash settled to a daily reference rate, which brought regulated, centrally cleared bitcoin exposure to institutions in December 2017.

The standard contract is 5 BTC; the micro contract is 0.1 BTC, which at a $60,000 price is $6,000 of notional and the practical size for most accounts. Settlement is in cash against the bitcoin-reference-rate, so no coins, wallets or exchanges are involved.

These contracts differ from the perpetual-futures that dominate offshore crypto venues in three ways that matter: they expire monthly, they have no funding-rate, and they clear through a regulated clearing-house with span-margin rather than an exchange's own liquidation engine.

The CME basis — futures above spot — is widely quoted as a sentiment gauge and is the leg institutions harvest in a cash-and-carry-arbitrage against spot bitcoin ETFs.

Example: bitcoin spot $60,000, the three-month future $61,800. That is a 3% basis, about 12% annualised, available to anyone who can hold spot and short the future.

Related: bitcoin-reference-rate, ether-futures, perpetual-futures, cash-and-carry-arbitrage, funding-rate

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Contango and backwardationTwo futures curves against contract expiry: one rising above spot, one falling below it.The same commodity, priced for delivery at different dates.78.0076.0074.0072.0070.00Futures pricespot+1m+2m+3m+4m+5m+6mMonths until the contract expiresspot price74.00CONTANGOlater contracts cost more than spotBACKWARDATIONlater contracts cost less than spot
Contango and backwardation. A futures curve shows what buyers will pay for delivery in one month, two months and so on. When later contracts cost more than the spot price the curve is in contango; when they cost less it is in backwardation.

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